Which of the following statements concerning the cash budget is CORRECT?
A) Depreciation expense is not explicitly included,but depreciation's effects are reflected in the estimated tax payments.
B) Cash budgets do not include financial items such as interest and dividend payments.
C) Cash budgets do not include cash inflows from long-term sources such as the issuance of bonds.
D) Changes that affect the DSO do not affect the cash budget.
E) Capital budgeting decisions have no effect on the cash budget until projects go into operation and start producing revenues.

Question

Quizplus · Accepted Answer

Depreciation expense is not explicitly included in the cash budget because it is a non-cash expense. However, its tax effects are reflected in the estimated tax payments, which are a part of the cash budget. Therefore, option A is correct.

Option B is incorrect because financial items such as interest and dividend payments are included as cash outflows in the cash budget.

Option C is incorrect because cash inflows from long-term sources such as the issuance of bonds are included in the cash budget.

Option D is incorrect because changes that affect the DSO (days sales outstanding) can affect the cash budget if they result in changes to cash inflows or outflows.

Option E is incorrect because capital budgeting decisions can have a significant impact on the cash budget as they involve significant cash outflows and inflows related to capital expenditures and future cash flows.

Which of the Following Statements Concerning the Cash Budget Is